Despite the rising costs associated with college, earning a degree is the goal of many young Americans (and older non-traditional students that are returning to college mid-career!) The government is pushing for this country to become the best-educated in the world.
Student loans are a form of financial aid that can help people earn their degrees, but the loans are almost considered a necessary evil as millions of people get in over their heads and rack up excessive student loan debt that they can’t afford to repay. U.S. President Barack Obama is hoping to change that.
The U.S. government offers college students need-based financial aid in the form of Pell Grants and the American Opportunity Tax Credit, but many students are still forced to take out student loans which must be repaid after they graduate or leave school for other reasons.
MSN Money reports that today’s college graduates have an average student loan debt of $27,204 which equates to monthly payments of approximately $330. Considering that the current state of the economy means many college graduates are unemployed or reduced to accepting low-paying jobs for which they are over qualified, three hundred dollars a month can be difficult to pay.
On Wednesday, October 26, 2011 President Obama announced a new plan to take steps that will help college graduates ease the student loan burden. Obama made the announcement at the University of Colorado’s Denver campus, where he was introduced by Mahala Greer, a senior with $30,000 in student loan debt. Obama told the crowd that he and his wife owed a total of $120,000 in student loan debt when they got married after law school.
According to A guide to Obama’s student loan plan by Kimberly Hefling of the Associated Press, total outstanding student loan debt has passed the $1 trillion mark, surpassing credit card debt. Average student loan debt for college students continues to rise.
Obama vowed to accelerate a law passed by Congress last year which will lower the maximum required payment on student loans from 15% of discretionary income annually to 10% for eligible borrowers, causing the law to go into effect next year instead of 2014 as planned. Remaining debt would be forgiven after 20 years rather than 25 years, which was another change set to begin in 2014.
Obama’s new student loan plan could affect as many as 1.6 million borrowers, potentially saving them hundreds of dollars per month. Borrowers that are already in default on their student loans will not qualify, and the new income-based plan will only apply to students that borrowed between 2008 and 2012 and borrowers that take out loans in 2012 or later.
Additionally, borrowers with at least one direct loan from the U.S. government and a loan from the Federal Family Education Loan Program, which were issued by private lenders but backed by the government, will be able to consolidate their loans at an interest rate of up to a half percentage point lower. The White House reports that the consolidation portion of Obama’s student loan plan could affect approximately 5.8 million borrowers.
“I need you guys involved, I need you active,” Obama urged his audience of University of Colorado students, states The New York Times. “Tell them, ‘Do your job,’ ” he said to applause, asking students to press lawmakers to act. “Too many people out there are hurting for us to just sit around and do nothing.”
Video from AssociatedPress
Melissa Rhone earned her Bachelor of Music in Education from the University of Tampa. She resides in the Tampa Bay area and enjoys writing about college, pop culture, and epilepsy awareness.
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